Posted
by
Soulskillon Friday March 22, 2013 @12:23PM
from the government-smells-funding dept.

Newsubmitter davek writes with news that the U.S. will be applying money-laundering laws to Bitcoin and other 'virtual currencies.'"The move means that firms that issue or exchange the increasingly popular online cash will now be regulated in a similar manner as traditional money-order providers such as Western Union Co. WU +0.17% They would have new bookkeeping requirements and mandatory reporting for transactions of more than $10,000. Moreover, firms that receive legal tender in exchange for online currencies or anyone conducting a transaction on someone else's behalf would be subject to new scrutiny, said proponents of Internet currencies. 'I think it's inevitable that just like you have U.S. dollars used by thieves and criminals, it's sadly inevitable you will have criminals use a virtual currency. We want to work with authorities,' said Jeff Garzik, a Bitcoin developer. Still, law enforcement, regulators and financial institution have expressed worries about the hard-to-trace attributes of virtual currencies, helping trigger this week's move from the Treasury's Financial Crimes Enforcement Network, or FinCen."

Not really, USD are taken by anybody in the US that lends money as well as for taxes. BTC are basically just useful by a small number of people that aren't very good at math. The rest of us stick to currency and barter of things that actually exist.

Now, if BTC was a mandatory option for payment and was likely to continue that way into the future, then it would be a closer analogy. But, even there with the fixed maximum supply and the curve at which they're being introduced, being what they are, even then it would be a stretch.

You can take a handful of dollars and spend them just about anywhere in the US, plus many parts of the world. Retail stores, gas stations, even to give to the kid who mows your lawn. A flash drive with some bitcoins on it is essentially useless almost everywhere, and only slightly less useless on the internet (it's country of origin). If you have a handful of Euros, or Yen, or whatever, at least in the US you can go to any bank and have them exchanged. I don't know of any bank that will exchange bitcoins. I can take my visa or mastercard (eurocard) and use it most places in the world and pay in the local currency but get billed at home in USD (with an extra fee). I can not use a visa/mastercard to buy anything that takes only bitcoins.

Bitcoins are pointless everywhere except for a very tiny number of places on the internet.

Now the idea of a digital currency is not a bad idea by itself. However the currency should be tied to something tangible at the start, and not generated from nothing by "mining". The people pushing bitcoins the most are the speculators who have a significant chunk of mined bitcoins that they got for free, and they are hoping that the value goes up so that they can cash out. The people wanting a true digital currency are not necessarily bitcoin fans.

Has it occurred to you that government might restrict what you can pay with? Try making up your own paper currency to avoid taxes, see how far that gets you. Bitcoin's cryptographic tricks provide no protection against this.

That's an amusing thing to post under a story that is about the government doing exactly the opposite. Contrary to the oddball spin this was posted with this is the regulatory branch of the government that oversees the largest economic and military power in the world saying it intends to treat and regulate USD interaction with Bitcoin in the same manner it does Euros. The implication being there is no intention to attack or block bitcoin in any way. In fact they explicitly spell out that decentralized curre

Bitcoin is not easy to trace when it is not linked to something like a bank account transaction. It has to be linked to delivery of goods, but the problem here is that receiving a delivery is not evidence of a crime. There has to be evidence that the person receiving the goods also paid for them.

No matter what you're paid with, you still need to pay the taxes to the IRS if you are a US citizen, and in almost all cases they must be converted to USD. Having income in bitcoins does not exampt you from tax obligations on that income. Even if you are paid in teddy bears you need to be reporting this.

If the average user can't exchange bitcoins for dollars, what good is it?

Finally someone gets it, and explains why the EU is failing. All those people earning and spending euros, never converting them to dollars, wasting their time, getting nothing out of it. Don't they understand? If they don't convert to dollars, they're useless. Fortunately for the euro, they can convert to dollars, but so few europeans take advantage of this to validate to the euro. Thus, it never gains legitimacy.

Which aspect of unregulated currency exchange is akin to murder again? For every useful law you can point to I can point to another one that is a bad idea.

This is a good thing all in all. The government has given a nod to Bitcoin. Stated it intends to treat it like any other foreign currency. And will work from the assumption that controlling and tracking USD is a good way to maintain control.

You cannot buy from amazon with bitcoin directly. Instead bitpay handles that. If you want to buy from amazon, someone has to turn that into USD at some point. They will be the regulated party. If amazon takes bitcoins, all that would change is amazon would be regulated as a money changer.

Exactly. People are always looking for what they need Bitcoin for right now. Bitcoin fortunately has managed to find enough answers for that so far but the benefits if Bitcoin gains critical mass are astounding.

Bitcoin has the potential to be a universal currency that no government and can seize or freeze. No company can trick you into a subscription with fine print and make you pay. No vendor can force you to put a debt before buying food for your family because the bank or government supports them over you.

This is all good for the people. No more charge backs, and no more ability for merchants to pull funds from your account without getting authorization every single time. No more US creating money through hidden inflation. No more China artificially reducing the value of it's currency.

The current schemes burn honest consumers, merchants, banks, traders, and even governments. For every advantage gained by manipulating the system in some way there is somewhere else they get burned. A value exchange medium that isn't controlled by anyone, is global, can't be seized, can't be manipulated, and can be exchanged instantly and easily is ultimately a good thing for everyone.

Bitcoin works? Here I thought it was just good for giving you heatstroke, buying child porn or drugs, and breaking when there are more than about 70,000 transactions across the network per day (compared to Visa's 300 million). The currency of the future, ladies and gentlemen!

Nota bene: I would have mentioned buying slim jims and ramen, but the self-made captains of industry running Bitmunchies weren't able to turn enough of a profit and shut down. Speaking of Bitcoin businesses, how's Roger Ver's Bitcoin st

Visa works in real currencies that you're guaranteed to be able to use, their main problem was a lack of outlets. Which does build over time, what's more they weren't limited to just one currency, they could expand into all currencies if need be.

In this case, you've got something starting small in a currency that's ultimately doomed from the start. Yeah, that's exactly the same thing as Visa's near unlimited flexibility. What's more, Visa was following the Diner's Club into the market, they already knew wha

The regulation is clearly going to happen at MtGox or any other place that exchanges bitcoins for USD. Once you are sending $10,000 USD to someone, the money laundering provisions apply. This should work for as long as businesses don't accept bitcoins directly, which is still mostly the case. There are a small number of businesses that will deal directly in bitcoins, but not enough that you could spend $10,000 on them reasonably yet.

Can't businesses accept any amount of cash without declaring it, or are they required to declare that as well? I assumed most of these rules only applied when you tried to put the money in a bank, etc.

They don't have to, but if you go into a dealership and try to buy a new car with cash, they're probably going to see that as suspicious. Very, very few people pay cash in the literal sense for a vehicle, those who do have the money will usually pay by cash, because carrying around $24k in unrefundable currency is pretty risky. Not to mention a real PITA to count and carry.

I used to get paid monthly in cash at a job I worked, and the 6500 would be a stack of hundreds about 2" high IIRC.

Even if businesses accept bitcoins directly, if they accept $10,000 worth of bitcoins in a single transaction this ruling is that they are required to report it just as they would be required to report it if they accepted USD cash.

First, a small point: the laws apply to ALL transactions. The laws for MANDATORY reporting are at $10,000. If a financial institution suspects something weird -- which can mean a $9,999 transaction, 100 transactions of $100 each, a $5000 transaction where a teller noticed the customer also has another $5,000 in cash that he's not doing anything with yet, or a transaction where a customer said, "oh, wait, let me take that cash back and deposit a little less so I am below the $10,000 mandatory reporting limit" -- then they can, should, and probably will still file a report. This applies at banks, airports*, and numerous other places.

* Side note: ever wonder why you can't travel with more than $10,000 cash? Well, you can. Ever wonder why some people act like you can't? Because it means paperwork. It's perfectly legal to walk through an airport with $10,000 and say, "I'm going to Las Vegas to bet the farm." It just means at some point customs, your bank, and the casino cashier will have forms to sign saying they saw $10,000. Unless you actually are driving to the Nevada desert for a drug deal, it's really no skin off your back.

Second, I'm going to make this an, "I told you so," to posters on previous threads who seemed to believe that U.S. money laundering laws only applied to U.S. currency. It's most easily enforced at large, brick and mortar companies actually doling out greenbacks, but it's applicable always and everywhere something is a currency. If enough people were in a mood to transfer all of their cash in to WoW gold pieces, it would apply. It applies equally to Americans and in American jurisdictions to: U.S. dollars, mostly-defunct financial instruments like Bank promissory notes, to proxies like casino chips (and WoW gp), and non-federal currencies like Ithaca Hours [wikipedia.org], Chinese Yuan, and BitCoins.

Third, on a larger scale, let this be a reminder that there is no "cyberspace". The internet is not something apart from the rest of the world. The internet is just something the whole world is "doing" right now. There is no cybercrime, just crime. There is no cyberlaw, only law. The internet is not regulated differently than any other aspect of our lives, except that special provisions are necessary to disambiguate jurisdiction and to enable law enforcement to cope with the realities of the situation, much in the way "wire fraud" was created as a federal crime to allow enforcement agencies to cope with the jurisdictional questions of a crime committed in one state by a perpetrator in another. The internet is not special. All laws still apply.

They will comply because if they don't it means that they can never have a US account, ask for US dollars, trade US equities, etc, etc, etc... If you are willing to 100% forgo every and any tie to the US, go for it! The US is even for us foreigners a part of our daily lives, directly or indirectly.

You still have to bring the money into the US if you're in the US. Unless you're suggesting breaking US law by sending packages of cash and not declaring them as such, the government will find out about it one way or another. And even if you do opt to go the boxes of cash route, you're stuck making small deposits into your account in order to avoid having your bank report it.

Bottom line is that the US government has plenty of tools to solve this particular problem. And I'd be very surprised if other governm

I would like to see anyone try to take on such a huge network. A bank couldn't afford to do it. Perhaps with the NSA's budget they may have some crypto chip that could outhash anything out there. Otherwise I simply don't see how to take over 51%.

Right now the bitcoin network is using 58.710 T/hashes. Everything is gauged in Mhashes so that is 58 billion 710 million M hashes. Top GPU does 1200 Mhash so you'd need about 49 million in GPUs of them running. At $777 each that's 38 billion to duplicate the network, doubling it. Not including anything else on a computer.. no boards, no CPUs, no electric to run them. I think my math is right.

Total value of all bitcoins if bought outright is 10,936,000 BTC * $72 = 787 million. Sure an entity could try to buy every coin out there. That'd be interesting to see if that would shoot the price even higher. I'm not sure how that would play out. But BTC can go 8 decimal places so even if they get very expensive people can use small portions of them.

Shutting down the peer to peer network is about the best that would be doable. Outlaw bitcoin, shut off anyone using it, and perhaps. But there is an estimated $2 million USD done on the silk road every month so people are fine doing illegal things.

This is all about control. Bitcoin was created to avoid the banks. There is no way to "print" more USD to buy treasury bonds like we're doing now. The banks with direct ties with the government is probably fearful this idea of being able to avoid banks entirely actually catches on. That would not be good for business.

Bit Coin works even if there are no "firms" to issue or exchange. Therefore, there is no one to regulate.

On the contrary. Just because there is no one 'issuing' or 'exchanging' Bitcoins doesn't mean that businesses and individuals using Bitcoins can't be regulated. Like MtGox and the other Bitcoin exchanges, or companies that accept Bitcoins in lieu of US dollars for goods and services.

In some ways, this may also pave the way for wider acceptance of Bitcoins because more traditional companies are wary of

To fight crime, but if you want to live in a country that corruption has overrun you can just go to mexico.The funny thing is that I'm sure you are against corrupt politicians, but it's much easier to just ignore consequences of what you want.

What happened to things like the 4th amendment or innocent until proven guilty? If the govt. has a reason to belive someone is involved in crime, then they can get warrant to then have the bank notify them if that person is making large transactions. It should not just be a big fishing expedition where people have to prove their innocence every time they make a transaction over an arbitrary amount.

Why not just randomly raid the houses of people in rich neighborhoods to make sure they aren't doing something

The drug war ship sailed a long time ago and 80% of Americans were out there cheering their loss of freedom. Cash reporting, private property seizure by suing the property, drug dogs, highway checkpoints, etc are all casualties of the war on drugs and almost no one in America was ever concerned about it.

You want to stop the insanity? Become an activist for total legalization and a rollback of all drug war inspired legislation.

so go make your own society, where such controls don't exist. and after you get ripped off, by... get this... criminals... learn your lesson the hard way

Ah, well, couple of problems with that.

The first is that anti-money laundering isn't something that every country arrived at independently through a careful process of democratic consideration and cost/benefit analysis, as you imply. In fact it was invented by Congress in the 70s, institutionalized through a body called the FATF-GATI and then forced on the

Anyone can playact a childish form of appearing intelligent by asking stupid questions. Real intelligence appears in the form of making a case for one's positions.

Well, not so much in the US. The Constitution and the govt and the courts do NOT grant us our rights, we are born with them inherently. Therefore, it is the proper thing to do to question any time the govt starts to assert new authority or set limits on your free to do activity.

Also, there is nothing wrong with questioning laws already on the books...as that they might not should be there to regulate you.

We're not here to serve the US govt, they are here to serve us...although, they often seem to be forgetting this.

The gold standard also works if there are no "firms" to issue or exchange it. People can do transactions person-to-person with no intermediary. Or, heck, cash transactions - me buying a truckload of goods in exchange for cash payment cannot be directly regulated.

What CAN be regulated are transactions through banks and financial firms. You can sell a truckload of goods for cash no problem, but depositing $1,000,000 in cash will raise some eyebrows. Similarly, you can buy all the bit

I suspect you are the one who doesn't get it. Government makes demands. If those demands aren't met, aren't countered through an internal process (like voting the pols who made those demands out), or if those demands aren't bluffs, there's an escalation. Eventually, force will be used.

There are people to regulate. The government will identify them if the politicians, lobbyists, and special interests are determined enough. I'm not sure if they are. How many transactions over $10,000 in value are being done with bitcoins (the minimum for these rules applying)? I didn't read TFA too closely, but I couldn't see any estimates.

Many slashdotters may disagree that the government isn't serious about stopping bitcoin use, but hear me out. Banks and law enforcement may have made statements "worrying" about it, but that doesn't mean they see it as a real threat due to how few people use bitcoins. Bitcoin proponents love to think that what they're doing will be a revolution, but bitcoins seem to be losing ground (if they had any to begin with.) I can't imagine banks or law enforcement spending much capital on a problem that is solving itself. The "I want taxes" bureaucrats aren't likely to pursue it either for the same reasons. They don't, after all, usually audit teenage babysitters for tax evasion. And I'd wager babysitting is a more lucrative economy than anything happening on bitcoin.

I agree bitcoins aren't the real target. In addition to the corporation-tied virtual currencies you mention, online game currencies are of interest to law enforcement recently because they've been used to launder money. It's quite straightforward: you buy a bunch of virtual gold with USD, then you

Solution (and business decision): Have the exchanges in tax heavens. Make all transfers bitcoin-only, until you really need to cash out.
Not an easy thing to solve for the tax guys, but maybe this time they will bother do something that can eventually be used to prevent the tax evasion and money laundering happening until now with regular currencies.

I think you have to separate the question of whether X/Y/Z things are bad from the question of money laundering. AML is an extremely complex, expansive and vague set of laws that more or less attempt to fight crime by creating a systematic network of surveillance and control over the financial system. That's why you read about people having to automatically file paperwork for transactions that are "suspicious" (what this means is not well defined). That's why anonymous banking is illegal - the assumption is anyone could be a criminal so everyone has to monitored, all the time. And in fact, it appears that parts of the USG have created a system in which not only are such reports dumped, but all records of all financial transactions ever (this is the TFTP).

One may question whether systematic surveillance is the right way to fight crime... whether the costs are worth the benefits. Most western societies instinctively reject widespread surveillance - we wouldn't accept government controlled security cameras in our homes despite the obvious application to crime fighting. However without anyone really noticing this is what's happened to finance.

The other scary thing about this system is that with the ability to track every transaction comes the ability to veto them too. Consider the case of the US citizen who got on the wrong side of Israel and was put on the sanctions list for 17 years [suntimes.com]. He was finally removed (and they agreed he was not a terrorist) after the Treasury was sued, 1 day before the law stated they had to respond. This kind of rampant abuse of power comes due to the ability to punish people without going via the courts, a power made possible by extensive AML controls.

If the largest harm in cracking down is to listen to you whine, I'd happily take the law. Tax dodges and more importantly drug slingers are the major problem in society and they directly/indirectly kill thousands of people yearly in US/Mexico alone. Your high minded slights on over-reaching control fanaticism makes me sick to my stomach. Get a grip and reality and tell me your GOVERNMENT is the bigger threat than the gang bangers around the corner.

The problem isn't necessarily the government of today, in it's current state. The problem is that granting any government greater power than it already has is an action that's very difficult to undo; that power is unlikely to be relinquished without a protracted fight. That means you're not just trusting the government of today not to abuse whatever you allow them to do, but also every conceivable future government.

If you want to truly evaluate whether the government should be permitted to do a thing, fir

Same as when banks started having to report transactions of a few thousand dollars to the feds, because it could be "money laundering".

And you would expect something different for BitCoin over Western Union money orders?

Nothing is really different here. If you don't use some institution that is subject to the reporting rules or physically move money over national boundaries, you are free to make transactions anyway you choose. Want to spend $100K as stacks of $20's and buy something you can (assuming somebody is willing to sell what you want to buy). Same with BitCoin.

Yea! Bitcoin is growing up! That means enough people are using it that the government is noticing. And of course the first thing the government does to show its appreciation is to start regulating it. Did they at least get a "Baby's first regulation" card?

The move means that firms that issue or exchange the increasingly popular online cash will now be regulated in a similar manner as traditional money-order providers such as Western Union Co. WU +0.17%

Sigh. Inline, updating stock quotes in business and finance articles are annoying enough in their own context. When taken out of that context by a lazy and sloppy copy-paste, as had happened with this article summary, is just plain disappointing. Does nobody bother to copy-edit these things before they go live? I thought this was/., not reddit.

Money laundering? BS. If they cared about money laundering then they'd go after the bankers who are laundering millions of dollars in drug money for the cartels.

What this is really about is a banker-government that will do anything and everything possible to prevent alternatives to their fiat + fractional reserve monopoly on money. These parasites absolutely can't have us serfs using a money supply which they can't control and manipulate in order to enrich themselves at the expense of everyone else.

"Let me issue and control a nation's money and I care not who writes the laws." Mayer Amschel Rothschild

What this is really about is a banker-government that will do anything and everything possible to prevent alternatives to their fiat + fractional reserve monopoly on money.

The problem with your thesis is this - it's utterly and completely wrong. Subject to a few simple rules, the government doesn't give a shit whether you conduct your business in dollars, bitcoins, or mason jars full of hamster poop.

Despite periodic "corrections", the price is still continuing to rise precipitously. The volatility is insane, but how viable is it that the price on 1 Jan 2013 was 1 BTC/~$15, and now it's trading for ~$70? The value has more than quadrupled in the 81 days so far in 2013. If the present bubble is extrapolated that represents roughly a 103,000% APY [google.com]; clearly, that growth is unsustainable.

Quite viable. The price increase initially came as a result of the reward for mining being halved by the network so the supply of Bitcoin was halved. Additionally, ASIC miners are dramatically faster and slow to trickle in. These result in a dramatic increase in mining difficulty. That means the output of most miners dropped dramatically and the prices they must charge to cover their costs goes up. Miners don't just unlock new currency units, they process Bitcoin transactions and assure the coin used is not

I guess we really need to keep FinCrime busy now that all those bankers and investment brokers are in jail. Oh, wait...

But foolishly, folks, this looks like a way to puff up the arrest numbers and make for some easy convictions to justify their shrunken budget (FinCrime got seriously defunded the instant they started looking at the big banks and investment houses) to Congress. The prevailing metric of any police force is their arrest record and conviction rates. Go after small fish you can steamroller cause the whales fight back.

All these financial instruments must be regulated and monitored for our safety.

Yes, I remember the paralyzing fear and chaos of the days of a primarily cash economy, too./sarcasm

If you actually were old enough to remember (or interested enough to have read about) when the printing of the kind of paper currency we now refer to as cash was unregulated, before it first became heavily regulated and then a government monopoly, you probably wouldn't use the sarcasm modifier.

I wasn't talking about before currency was regulated by governments (no one is that old), I'm talking about before any transaction greater than $10,000 became subject to Federal scrutiny, like maybe 40 years ago, which I *do* remember, and yes it was a "primarily cash economy". How you took that mean "prior to gov'ts to controlling their currencies" is beyond me. My point was that the idea that we need these regulations "for our safety" is rather ludicrous when our society functioned just fine without them in recent memory.

The problem with all this is that "money laundering" generally comes from activities which are victimless crimes, and are therefore not a crime because they don't affect anyone but the person doing them.

Yeah - that money from a protection racket or from running a prostitution ring or from embezzling... no victims there. Or to put it another way, if you think ill-gotten gains only come from money that appears from thin air, you're either *very* innocent about how the world works or utterly and completely clueless.

Uhh, explain to me why prostitution is a crime? If a person is being forced into sex work, this is kidnapping and slavery. If a person embezzles from another person, that is theft. You DO understand the difference between malum prohibitum and malum in se?

you're either *very* innocent about how the world works or utterly and completely clueless.

I don't think the proper word is "or" but "and".... Very naive AND completely clueless.. Victimless crimes, shesh, Just because you cannot point to a single person or small group that is a victim does not mean the crime is somehow less or that ripping off a large corporation is somehow better than stealing grandma's life savings.

Wrong is wrong and unethical behavior is unethical even if you don't have a clear victim you harmed.

The problem is that the average man on the street thinks the crime of "money laundering" means "hiding the proceeds of crime". That's the definition you'll find in the dictionary, on Wikipedia etc. If you actually read the regulations however, by far the majority of offences labelled as money laundering boil down to not filing the right paperwork or myriad other things. For example, it's quite routine for farmers to be accused of money laundering for depositing their money in chunks of less than $10k [cbn.com], typic

Drugs besides alcohol and prescribed pills are illegal because they circumvent a distribution apparatus.

That's not the reason why drugs are illegal. Harry Anslinger, who led the effort to outlaw pot in the 1930's, explained his motivations:"There are 100,000 total marijuana smokers in the US, and most are Negroes, Hispanics, Filipinos, and entertainers. Their Satanic music, jazz, and swing, result from marijuana use. This marijuana causes white women to seek sexual relations with Negroes, entertainers, and any others."

That why the drugs favored by white people back in the day (tobacco and alcohol) are legal, but the drugs favored by non-white people at the same time (marijuana, opiates) are illegal.

The next major round of prohibitions was very explicitly because Richard Nixon wanted an excuse to lock up the hippies, who he saw as a threat to America.

And that is exactly the problem with this regulation. If transactions of more than $N into and/or out of bitcoins must be reported, criminals will keep their transactions under $N. They can create as many bitcoin accounts as they want. As long as they get the money into different US dollar accounts before buying bitcoins with it, there is nothing to tie the transactions together, and they won't be reported.